Legislature(2017 - 2018)BELTZ 105 (TSBldg)
03/09/2017 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| SB56 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 56 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 9, 2017
1:40 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Shelley Hughes, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
Senator Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARINGS
Alaska State Board of Public Accountancy
Marja Beltrami - Anchorage
Wayne Hogue - Kotzebue
Donavan Rulien, II - Anchorage
CONFIRMATIONS HEARD AND HELD
Fisherman's Fund Advisory and Appeals Council
Clay Bezenek - Ketchikan
CONFIRMATION HEARD AND HELD
Board of Pharmacy
Lana Bell -Anchorage
Taryl Giessel - Eagle River
James Henderson - Soldotna
CONFIRMATIONS HEARD AND HELD
State Board of Registration for Architects, Engineers, and Land
Surveyors
Elizabeth Johnston - Fairbanks
Richard Jones - Juneau
CONFIRMATIONS HEARD AND HELD
Board of Certified Real Estate Appraisers
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 56
"An Act relating to product warranties and services for certain
products; relating to certain dealers, distributors, and
manufacturers; and establishing an unfair trade practice under
the Alaska Unfair Trade Practices and Consumer Protection Act."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 56
SHORT TITLE: PRODUCT WARRANTIES & REQUIRED UPDATES
SPONSOR(s): SENATOR(s) GIESSEL
02/13/17 (S) READ THE FIRST TIME - REFERRALS
02/13/17 (S) L&C
03/09/17 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
MARJA BELTRAMI, Appointee
Alaska State Board of Public Accountancy
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Alaska State
Board of Public Accountancy.
WAYNE HOGUE, Appointee
Alaska State Board of Public Accountancy
Kotzebue, Alaska
POSITION STATEMENT: Testified as appointee to the Alaska State
Board of Public Accountancy.
DONAVAN RULIEN, Appointee
Alaska State Board of Public Accountancy
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Alaska State
Board of Public Accountancy.
CLAY BEZENEK, Appointee
Fisherman's Fund Advisory and Appeals Council
Ketchikan, Alaska
POSITION STATEMENT: Testified as appointee to the Fisherman's
Fund Advisory and Appeals Council.
MARK SALDI, representing himself
Skagway, Alaska
POSITION STATEMENT: Testified in support of the reappointment of
Clay Bezenek to the Fisherman's Fund Advisory and Appeals
Council.
JERRY MCCUNE, President
United Fishermen of Alaska
Juneau, Alaska
POSITION STATEMENT: Testified in support of the reappointment of
Clay Bezenek to the Fisherman's Fund Advisory and Appeals
Council.
LANA BELL, Appointee
Board of Pharmacy
Anchorage, Alaska
POSITION STATEMENT: Testified as an appointee to the Board of
Pharmacy.
TARYL GIESSEL, Appointee
Board of Pharmacy
Eagle River, Alaska
POSITION STATEMENT: Testified as an appointee to the Board of
Pharmacy.
JAMES HENDERSON, Appointee
Board of Pharmacy
Soldotna, Alaska
POSITION STATEMENT: Testified as an appointee to the Board of
Pharmacy.
ELZABETH JOHNSTON, Appointee
State Board of Registration for Architects, Engineers, and Land
Surveyors
Fairbanks, Alaska
POSITION STATEMENT: Testified as an appointee to the State Board
of Registration for Architects, Engineers, and Land Surveyors.
RICHARD JONES, Appointee
State Board of Registration for Architects, Engineers, and Land
Surveyors
Juneau, Alaska
POSITION STATEMENT: Testified as an appointee to the State Board
of Registration for Architects, Engineers, and Land Surveyors.
SENATOR CATHY GIESSEL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 56.
AKIS GIALOPSOS, Staff
Senator Cathy Giessel
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis for SB 56.
ED SNIFFEN, Deputy Attorney General
Civil Division
Regulatory Affairs & Public Advocacy (RAPA)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to SB 56.
CHRIS GERONDALE
Construction Machinery Industrial, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 56.
STEVE SEWARD, Attorney
Construction Machinery Industrial, LLC
Seattle, Washington
POSITION STATEMENT: Answered questions related to SB 56.
JIM HALLORAN
Caterpillar Inc.
Peoria, Illinois
POSITION STATEMENT: Testified in opposition to SB 56.
NICK YAKSICH, Senior Vice President
Association of Equipment Manufacturers
POSITION STATEMENT: Testified in opposition to SB 56.
ACTION NARRATIVE
1:40:28 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:40 p.m. Present at the call to
order were Senators Hughes, Gardner, Stevens, Meyer, and Chair
Costello.
^CONFIRMATION HEARINGS
CONFIRMATION HEARINGS
Alaska State Board of Public Accountancy
Fisherman's Fund Advisory & Appeals Council
Board of Pharmacy
State Board of Registration for Architects, Engineers, & Land
Surveyors
1:41:11 PM
CHAIR COSTELLO announced the first order of business would be
confirmation hearings for governor board & commission
appointments. She thanked the nominees and advised that members
have information about the individuals in their packets. She
noted that the names of all appointees would be forwarded in one
batch at a later date.
1:42:38 PM
CHAIR COSTELLO asked Marja Beltrami of Anchorage to tell the
committee about her interest in serving in the CPA seat on the
Alaska State Board of Public Accountancy.
1:43:09 PM
MARJA BELTRAMI, Appointee, Alaska State Board of Public
Accountancy, Anchorage, Alaska, said she has been a CPA for more
than 20 years and has her own business. Her interest in serving
on this board is to keep her profession moving forward and
ensure a good future for her staff.
CHAIR COSTELLO asked if she sees any particular challenges the
board will address in the coming year.
MS. BELTRAMI replied she is not aware of any major changes on
the horizon.
SENATOR GARDNER asked her to talk about the possible conflict of
interest given the business she owns and the work with this
board.
MS. BELTRAMI said she is subject to all the decisions that board
makes so she may potentially be affected both positively and
negatively. "That's why I answered 'yes' I may potentially
benefit from any decisions the board would have, as would any
CPA that sits on this board and is in current practice."
SENATOR GARDNER, noting that five of the seven members of this
board are CPAs, commented that it makes sense applicants would
have an interest in serving in their area of expertise.
CHAIR COSTELLO thanked Ms. Beltrami for being willing to serve
and reiterated that the names would be forwarded in one batch at
a later date.
1:46:55 PM
CHAIR COSTELLO asked Wayne Hogue of Kotzebue to tell the
committee about his interest in serving in the public seat on
the Alaska State Board of Public Accountancy.
1:47:19 PM
WAYNE HOGUE, Appointee, Alaska State Board of Public
Accountancy, Kotzebue, Alaska, stated that he is not a CPA and
thus has no potential conflict of interest serving on this
board. He wants to serve in order to fulfill his civic duty. The
Governor's Office asked him to serve and he submitted his
application.
CHAIR COSTELLO noted that in the past he served on the Kotzebue
Alcohol Beverage Control Board.
MR. HOGUE confirmed that service and explained that he helped
implement the first city-owned liquor store in Kotzebue. It
provided good experience in rule-making and bringing regulations
in line with the rest of the nation.
SENATOR STEVENS asked if most of the meetings of the Alaska
State Board of Public Accountancy are audio conference or face-
to-face.
MR. HOGUE replied his first meeting was audio conference, but he
found it difficult to participate because the applications the
board was evaluating were physical files. The next meeting was
in Juneau and he traveled there to meet with legislators to
discuss potential changes; it was very productive. He said the
board is trying to get permission to bring him to the quarterly
meetings since he is remote. He and one other member are not on
the road system.
SENATOR STEVENS agreed that face-to-face meetings are better and
said he assumes that attending occasional meetings will not be a
hardship.
MR. HOGUE confirmed it would not be a problem.
1:50:50 PM
SENATOR HUGHES noted his employment history and asked what a
virtualization consultant is.
MR. HOGUE explained that virtualization is consolidating
computer resources into a centralized stack. He has been
involved with virtualization since the 1990s; it is the way of
the future.
SENATOR HUGHES asked if a virtual meeting would include
synchronous video teleconferencing and if that would be a
possibility for some of the state boards.
MR. HOGUE replied that is a possibility, but it won't work for
this board until everything under review is digitized. He noted
that teleconferencing is used extensively in the medical field
and that WebEx (which is a shared meeting) would enhance online
meetings and save on travel.
SENATOR HUGHES suggested he help usher that in for all boards
and commissions to save travel costs.
MR. HOGUE agreed that is a possibility and admitted he is very
pro technology.
CHAIR COSTELLO thanked Mr. Hogue for being willing to serve and
noted that public testimony would remain open on this and all
nominees.
1:56:36 PM
CHAIR COSTELLO asked Donavan Rulien of Anchorage to tell the
committee about his interest in continuing to serve on the Board
of Public Accountancy. She noted his long history of
volunteering.
1:57:27 PM
DONAVAN RULIEN, Appointee, Alaska State Board of Public
Accountancy, Anchorage, Alaska, said he and his wife moved to
Alaska 33 years ago and they believe it is important to be part
of and give back to the community. He advised that he just
finished his first term on this board and currently serves as
chair. He listed other organizations he has and does serve on
that have given him a good background to help serve Alaska CPA
licensees. He stressed that protection of the public is of
paramount importance.
SENATOR GARDNER noted his service as an expert witness and
wondered of many were divorce cases.
MR. DONAVAN answered yes, to establish fair valuations before
property is divided.
CHAIR COSTELLO thanked Mr. Rulien for being willing to serve.
2:00:05 PM
CHAIR COSTELLO asked Clay Bezenek of Ketchikan to comment on
serving on the Fisherman's Fund Advisory and Appeals Council.
2:00:43 PM
CLAY BEZENEK, Appointee, Fisherman's Fund Advisory and Appeals
Council, Ketchikan, Alaska, said he has been on the appeals
council for 11 years and is honored to be nominated to continue
to serve. He has been a fisherman for 34 years and has a clear
understanding that health concerns are very important for the
fleet, particularly since it is graying. The current board has a
good mix of fishermen statewide and historical knowledge is
transferred to newer members. He discussed the solvency of the
fund, licensing scams the legislature helped eliminate, and
tipped his hat to the people who started the fisherman's fund in
1952.
SENATOR STEVENS asked if the board becomes involved after a
fisherman has been hurt or become sick and a negative decision
has been reached on his/her coverage.
MR. BEZENEK said that's correct; the board looks at things after
it is deemed that the general criteria have not been met.
2:04:49 PM
MARK SALDI, representing himself, Skagway, Alaska, testified in
support of the reappointment of Mr. Bezenek to the Fisherman's
Fund Advisory and Appeals Council. He related that he has worked
with Mr. Bezenek for nine years and finds him to be a top notch
guy who likes to get things done. "Besides that, Clay knows just
about everybody in the state when it comes to fishing."
2:05:50 PM
JERRY MCCUNE, President, United Fishermen of Alaska, Juneau,
Alaska, testified in support of the reappointment of Clay
Bezenek to the Fisherman's Fund Advisory and Appeals Council. He
has served the longest of any member and has a clear
understanding of what is going on with insurance. His
reappointment is essential to the council. He noted that
fishermen have to use their own insurance if they have it, but
many do not.
CHAIR COSTELLO agreed that continuity is important, particularly
on the small boards. She thanked Mr. Bezenek for being willing
to serve and noted that public testimony would remain open and
that all the names would be forwarded in one batch.
2:07:39 PM
CHAIR COSTELLO asked Lana Bell of Anchorage to tell the
committee about her interest in serving on the Board of Pharmacy
in the pharmacist seat.
2:08:07 PM
LANA BELL, Appointee, Board of Pharmacy, Anchorage, Alaska,
stated that she was licensed in Alaska in 1988 and spent most of
her career in retail pharmacy. For the last 14 years she has
worked for the state at Pioneer Home Pharmacy. Alaska has
provided her great opportunities throughout her career and she
would like to give back. She discussed her participation as the
pharmacy board representative on the Governor's Controlled
Substance Advisory Council. It is an important topic for
pharmacists. She shared that in retail pharmacy she always had
to work closely with law enforcement because people will go to
great lengths to obtain prescription opioids. It is not a new
problem; "it's just out of control now."
CHAIR COSTELLO thanked Ms. Bell for her contribution and for
being willing to serve.
SENATOR GARDNER observed that she has expertise that could be
valuable to the legislature when it contemplates legislation to
address the opioid epidemic. She asked if in her role as a board
of pharmacy member or as a member of the controlled substance
council she is able to testify on legislation that would affect
her work at the state or federal level.
MS. BELL replied she would need to ask if she could testify, but
she is always available as a resource.
SENATOR HUGHES asked if she could talk about the frequency of
requests for prescription opioids now compared to five years
ago.
MS. BELL replied she no longer works retail; she works in an
institutional pharmacy where access is more controlled so there
isn't abuse. She clarified that street drugs have a large impact
on the out of control situation she referenced.
SENATOR HUGHES asked if she is seeing an increase in
prescriptions with an opioid base.
MS. BELL said she believes that many prescribers are more
careful now than in years past. She discussed how a certain
number of people will become addicted if they are legitimately
prescribed opioids. She said it's a balance to give a person
enough to heal without chancing addiction.
2:20:11 PM
SENATOR MEYER said his experience with pharmacists and getting
prescriptions filled is that the insurance companies are always
changing the rules on supply. He asked if she hears about that
difficulty and if there is anything that the legislature can do
to help the situation.
MS. BELL said her pharmacy does long-term billing and the
nightmare it has faced is on the federal level from the Centers
for Medicare and Medicaid Services (CMS) regarding the short
cycle. They can only dispense up to a 14 day supply, which
results in copay issues. What she has learned is that it is
critically important to do every claim correctly the first time.
2:25:11 PM
SENATOR GARDNER asked the reason for the 14-day limit on
prescriptions.
MS. BELL said it is a Medicare rule for long-term-care
facilities.
2:25:44 PM
CHAIR COSTELLO thanked Ms. Bell for being willing to serve.
2:26:05 PM
CHAIR COSTELLO asked Taryl Giessel of Eagle River to tell the
committee about her interest in continuing to serve on the Board
of Pharmacy in public seat.
2:26:31 PM
TARYL GIESSEL, Appointee, Board of Pharmacy, Eagle River,
Alaska, said she is a homemaker who has served one term on the
board in the second public member seat. It is an excellent board
that is doing a lot to further public safety and to protect the
profession. Her focus as a public member is public safety and
how to serve the public without tying the hands of the
professionals practicing in this field.
CHAIR COSTELLO found no questions or public testimony and
thanked Ms. Giessel for being willing to serve.
2:28:08 PM
CHAIR COSTELLO asked James Henderson of Soldotna to tell the
committee about his interest in serving on the Board of Pharmacy
in a pharmacist seat.
2:28:32 PM
JAMES HENDERSON, Appointee, Board of Pharmacy, Soldotna, Alaska,
said he has been in Alaska for 10 years and a pharmacist for 22
years. Most of his career has been in retail pharmacy and now he
has a home infusion pharmacy business. He was asked to serve on
the board and he feels it would be a good way to provide public
service and shape his profession.
2:29:33 PM
CHAIR COSTELLO found no questions or public testimony and
thanked Mr. Henderson for being willing to serve.
2:30:05 PM
CHAIR COSTELLO asked Elizabeth Johnson of Fairbanks to tell the
committee about her interest in serving on the State Board of
Registration for Architects, Engineers, and Land Surveyors in
the electrical engineer seat.
2:30:46 PM
ELIZABETH JOHNSTON, Appointee, State Board of Registration for
Architects, Engineers, and Land Surveyors, Fairbanks, Alaska,
said she is a registered electrical engineer and registered fire
protection engineer, which are two of the disciplines the board
governs for professional registration and practice.
2:30:58 PM
At ease
2:31:02 PM
CHAIR COSTELLO reconvened the meeting and asked if she
anticipates any challenges the board will face in the next year.
MS. JOHNSTON replied an issue she sees is the debate about
whether or not to include software engineering as a new form of
registration in Alaska.
CHAIR COSTELLO found no questions or public testimony and
thanked Ms. Johnston for being willing to serve.
2:33:15 PM
CHAIR COSTELLO asked Richard Jones of Juneau to tell the
committee about his interest in serving on the State Board of
Registration for Architects, Engineers, and Land Surveyors in
the public seat.
2:33:38 PM
RICHARD JONES, Appointee, State Board of Registration for
Architects, Engineers, and Land Surveyors, Juneau, Alaska, said
that before he retired from the state he worked in professional
licensing. In that capacity he worked with this board for
several years. He enjoyed that work and found the board provided
a valuable service. He said he is also aware of the importance
of an outside perspective and that is why he would like to
serve.
2:34:29 PM
CHAIR COSTELLO found no questions or public testimony and
thanked Mr. Jones for being willing to serve.
She reiterated her thanks to the nominees for providing their
time and expertise to the boards. She advised that there are
over 200 boards in Alaska and many are significant in managing
the profession across the state.
2:35:19 PM
At ease
SB 56-PRODUCT WARRANTIES & REQUIRED UPDATES
2:38:00 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 56.
2:38:29 PM
SENATOR CATHY GIESSEL, sponsor of SB 56, introduced the bill
speaking to the following sponsor statement:
Senate Bill 56 proposes fair treatment to Alaskan
consumers and businesses. Heavy equipment is expensive
and complicated. Most resource companies, contractors,
and many other consumers are dependent on the
availability of equipment to keep Alaskans employed
and businesses running.
Our state's remote locations and transportation
challenges, coupled with high shipping costs, often
can result in high costs to local dealers and
distributors when delivering warranty and update
services for a manufacturer's defective or deficient
products. Many of these services are not reimbursed by
the manufacturers who require this high cost work.
This results in our local businesses, or their
customers, absorbing expenses for shipping,
transportation, and labor that should be paid by the
company that manufactures the defective or deficient
products, provides the warranty, and requires the
updates.
Senate Bill 56 protects buyers of heavy equipment. If,
during the term of a warranty or, if earlier, within
one year after the date equipment is delivered to a
buyer, the manufacturer or dealer is unable to repair
equipment after a reasonable number of attempts, the
bill requires a refund or replacement of the
equipment.
Senate Bill 56 also would ensure that local dealers
and distributors of heavy equipment, machinery, and
tools used for construction, maintenance, resources
development and similar activities are adequately
compensated when providing required warranty service
and manufacturer's required updates on the products
they sell.
Senate Bill 56 builds on existing state law pertaining
to boats, and all-terrain vehicles (ATVs). The
legislation provides clarity, and certainty, for the
consumers that use and the manufacturers and dealers
that provide the equipment that keeps Alaska's heavy
equipment industries running. Senate Bill 56 would not
apply to vehicles licensed for use on roads, boats,
and ATVs; those items are covered under a separate and
current statute.
Senate Bill 56 protects consumers and balances the
interests of local dealers to be adequately made whole
for meeting their obligations to customers, while
setting clear guidelines for manufacturers of heavy
equipment products.
SENATOR GIESSEL said her staff, Mr. Gialopsos, is available to
take the committee through a sectional analysis if the chair
wishes.
2:44:10 PM
AKIS GIALOPSOS, Staff, Senator Cathy Giessel, provided a
sectional analysis for SB 56 speaking to the following prepared
document:
Section 1: Enacts 45.45.772 - 45.45.788, which outline
the obligations and duties of manufacturers,
contractors, dealers, and distributors when providing
"required services" which include warranty work,
corrective work on defective products, and updates
required by manufacturers. For simplification of this
sectional, the word "dealer" is used instead of
"dealer or distributor," the phrase that appears in
the bill.
Sec. 45.45.772 Requires a dealer to provide any
manufacturer's warranty in effect at the time of sale
to the purchaser. Outlines the obligations of each
party when a contractor provides warranty service on
behalf of the manufacturer.
Sec. 45.45.773 Requires a dealer to explain the
warranty coverage, including disclaimers, and
limitations; prohibits a dealer from making a
representation about a warranty that is not made in
the warranty; and requires the dealer to provide
manuals to the purchaser.
Sec. 45.45.774 Requires the dealer to provide warranty
service and to make all claims for warranty
reimbursement in the manner established by the
manufacturer.
Sec. 45.45.775 Prohibits a manufacturer from
restricting the nature or extent of labor or parts
that are needed to perform the work in accordance with
generally accepted standards.
Sec. 45.45.776 Requires the manufacturer to follow the
process outlined in this bill and standard industry
claim procedures when paying a dealer for required
services.
Sec. 45.45.777 Establishes the minimum compensation
for work performed by a dealer on behalf of a
manufacturer. Specifies the minimum rate and time for
labor costs. Also requires the manufacturer to pay for
transportation and lodging costs if the dealer has to
send an employee to the field to perform the work.
Sec. 45.45.778 Requires a manufacturer to reimburse a
dealer for parts used at the manufacturer's full
suggested retail price.
Sec. 45.45.779 If a part needed that is not in the
dealer's inventory, requires the manufacturer to pay
the cost to send the item, as soon as possible, to the
purchaser's choice of either the dealer that sold the
product or the dealer closest to the purchaser.
Sec. 45.45.780 Requires the manufacturer to pay or
disapprove a claim within 30 days or it is considered
approved and accrues a penalty of 1.5% per month.
Sec. 45.45.781 Requires a manufacturer's claim
disapproval to be in writing and issued within 30 days
of receipt of the claim.
"Lemon Law" Provisions:
Sec. 45.45.782 Requires the manufacturer or dealer to
repair a product defect that is covered under warranty
when reported by the purchaser.
Sec. 45.45.783 If a product cannot be repaired after a
"reasonable number" of attempts during the term of the
warranty or one year after purchase, whichever comes
first, requires the manufacturer to either replace the
product with a new comparable product or refund an
amount equal to the full purchase price minus a
"reasonable amount" for the period that the purchaser
was able to use the product. The purchaser can choose
whether to get a new product or refund. Outlines how
to calculate the "reasonable amount" for a refund.
Sec. 45.45.784 Establishes a process for the purchaser
to make a claim under 45.45.783. The purchaser must
make a written claim by certified mail to the
manufacturer within 60 days of the end of the term of
the warranty or one year after the purchase date,
whichever comes first. Outlines what must be in that
written claim. Allows the manufacturer to make a final
attempt to fix the item within 30 days.
Sec. 45.45.785 States that the manufacturer does not
have to replace/refund if the claimed product defect
is either not a defect or resulted from alteration,
abuse or neglect by a person who is not an authorized
dealer.
Sec. 45.45.786 Creates a rebuttable presumption that
if the product has been in the shop for repairs three
separate times or for 30 days during the warranty
period or first year of ownership, whichever is
shorter, a "reasonable number of attempts" to fix the
product has been made.
Definitions for language enacted in this bill:
Sec. 45.45.787 Defines what products are covered by
this legislation.
Sec. 45.45.788 Establishes what qualifies as a
"warranty service."
Section 2: Amends the definition of "merchandise" in
AS 45.45.790 to include "covered products" - a term
used in this bill.
Section 3: Adds definitions to AS 45.45.790 for terms
used in this legislation.
Section 4: Adds violations to the provisions in
Section 1 to the list of unfair methods of competition
and unfair or deceptive acts or practices found in AS
45.50.471.
Section [5]: Applicability - specifies that this bill
applies to agreements entered into on and after the
effective date of this act.
2:54:01 PM
SENATOR STEVENS asked if passing this bill might result in a
manufacturer such as Caterpillar deciding it isn't worth doing
business in Alaska.
SENATOR GIESSEL clarified that the vendor travels to the
locations, not the manufacturer. She posed the hypothetical
scenario of a vendor in Anchorage who is required to either
travel to the remote location to provide warranty service or
ship the equipment back to Anchorage for repair. Right now, the
vendor is required to do that to cover the warranty, but the
manufacturer may decline to pay the vendor's full costs. The
Alaska vendor assumes the extra costs. SB 56 seeks to remedy
that; the manufacturer must agree to cover the full costs.
SENATOR STEVENS voiced concern about potential harm if
manufacturers decided not to do business in Alaska if they had
to cover what could be enormous additional costs.
SENATOR GIESSEL suggested that he ask the vendors who are online
to offer their perspective, but she believes it is unlikely that
the bill would cause a company like Caterpillar to stop doing
business in Alaska.
2:57:48 PM
SENATOR GARDNER said she too shares that concern. It may be an
unintended consequence that Alaskans would have to buy equipment
in Seattle and the warranty would only be valid in the state of
Washington.
She referred to Sec. 45.45.787 on page 7 that refers to the
products that are covered under the bill. She asked, if this is
a good idea, why not apply it to all products sold in Alaska?
MR. GIALOPSOS explained that this legislation was introduced at
the request of some of the affected stakeholders that
specifically work with off the road system manufacturing and
dealer issues. The language is based on the legislation that
passed in 2009 when all-terrain vehicles, boats, snow machines
and other off-road vehicles were brought under coverage for
warranty service in remote regions. The legislative intent in
2009 was clear that there was a delineation between items
registered for operation on a road and those that are
specifically purposed for off-road use.
SENATOR GARDNER continued to question limiting the coverage to
items involved in resource development or construction. She
pointed out that it could be similarly expensive to get warranty
work done on a commercial refrigerator that was shipped to Cold
Bay, for example.
MR. GIALOPSOS said the individuals who will testify can talk
about the relationship between a dealer of industrial commercial
pieces of equipment versus a home appliance from a big box store
that provides a direct, through-the-manufacturer warranty. Those
purchases are different for several reasons, one of which is the
exclusivity clause for some franchise holders and dealers. He
said it was the sponsor's intent to narrowly tailor the
legislation to cover the products it does.
SENATOR GARDNER asked if the provisions in subsections (b), (c),
(d), and (e) that start on page 3, line 1, are the same in other
parts of the country or unique to Alaska.
MR. GIALOPSOS deferred the question to the Department of Law.
CHAIR COSTELLO indicated the question would be held until later.
SENATOR GARDNER reviewed the provision in subsection (e) on page
3, lines 17-20, that requires the manufacturer to reimburse a
dealer or distributor for transportation and lodging costs to
travel to a location to perform required service. She said a lot
of her questions are about whether this is done in other states
or is unique to Alaska.
3:03:49 PM
SENATOR GIESSEL responded that it is impossible to compare the
challenges associated with doing business in a remote area of
Indiana, for example, versus the challenges of doing business in
remote areas of Alaska that can only be reached by air. "It is
in fact true that Alaska is different."
SENATOR GARDNER referred to Sec. 45.45.785 on page 6 that talks
about exceptions. She asked if a manufacturer would to need send
somebody to Cold Bay, for example, to show that an alleged
defect either is not a defect or is the result of an alteration
by somebody who is not the dealer or distributor.
MR. GIALOPSOS deferred the question to the people online waiting
to testify. They can recount specific case studies, he said.
3:05:27 PM
At ease
3:06:22 PM
CHAIR COSTELLO reconvened the meeting and asked Mr. Sniffen to
respond to Senator Gardner's questions.
3:06:43 PM
ED SNIFFEN, Deputy Attorney General, Civil Division, Regulatory
Affairs & Public Advocacy (RAPA), Department of Law, Anchorage,
Alaska, said he is not aware of what other states do with lemon
laws for large construction equipment. He agreed with Mr.
Gialopsos that some of the dealers who are online to testify may
have a more comprehensive understanding of how other states
handle this.
3:07:26 PM
SENATOR HUGHES referred to the list of products that are covered
starting on page 7, line 7. She asked if the Department of
Transportation and Public Facilities (DOTPF) will benefit from
the bill, resulting in a cost savings to the state.
SENATOR GIESSEL offered to follow up after doing research about
whether DOTPF purchases equipment through a local vendor or goes
directly to the manufacturer.
SENATOR HUGHES said if the department does deal with local
vendors, the list should be reviewed to ensure it is complete.
CHAIR COSTELLO asked Mr. Sniffen why contract law fails to
address the concerns that prompted the sponsor to introduce the
bill.
MR. SNIFFEN said most of these franchise relationships start
with contract negotiations and over time it becomes something
like an adhesion contract where the dealer doesn't have a lot of
bargaining power. That's why states like Alaska have auto
franchise laws.
SENATOR STEVENS asked if a manufacturer could declare that a
warranty is not covered in distant or remote locations.
MR. SNIFFEN said that would be difficult to do for a
manufacturer that sells equipment into a state knowing that it
is likely it will be transported to a remote area. Warranties
generally follow the equipment and unless there is a clearly
stated exception, the manufacturer would probably be required to
provide that service.
SENATOR STEVENS observed that it is simple economics; if it
costs too much to do business you find a way not to do it. He
said he agrees with Senator Gardner's comment about unintended
consequences but Mr. Sniffen doesn't seem to agree.
MR. SNIFFEN clarified that he is saying the manufacturer might
adjust the warranty after getting stuck with a large bill. He
added, "It's hard to say what the consequences of this
legislation might be."
3:12:50 PM
SENATOR HUGHES asked the estimated annual dollar amount that
dealers are paying for unreimbursed warranty work.
SENATOR GIESSEL suggested the franchise dealers answer the
question. She added that she has anecdotal evidence that they do
not pass those unreimbursed costs on to the consumer. "They
absorb that cost as Alaskan businesses themselves, and therein
lies the problem."
3:13:36 PM
At ease
3:13:55 PM
CHAIR COSTELLO reconvened the meeting and asked Mr. Sniffen if
lemon laws are in current statute.
MR. SNIFFEN replied Alaska has two lemon laws. The 2009 ATV
lemon law that was predicated on the existing automobile lemon
law. Alaska also has a distributorship law in Title 45 that
protects distributors of all products from certain practices of
manufacturers.
CHAIR COSTELLO observed that the committee heard similar
legislation last week; the legislature is being asked to set the
guidelines in certain areas because it doesn't appear that the
contracts are addressing the issues.
MR. SNIFFEN said this bill does not have the retroactive
provision that SB 47 has. It would only apply to new contracts.
3:16:23 PM
CHAIR COSTELLO opened public testimony on SB 56.
3:16:37 PM
CHRIS GERONDALE, Construction Machinery Industrial, LLC,
Anchorage, Alaska, testified in support of SB 56. He stated that
his family has been in the construction and heavy equipment
industry in Alaska since the 1930s. He works in the family
business and also does contract work for other heavy equipment
contractors and several mines in Southeast Alaska. He said that
he can see this issue from both sides.
He discussed heavy equipment warranties and product updates and
noted that in both instances the manufacturer is not required to
cover all labor or freight associated with these repairs. SB 56
would require manufacturers to cover a higher percentage of
those costs. This will be particularly helpful for small
contractors, farmers, loggers, and placer miners.
MR. GERONDALE explained the process when there is a failure and
the equipment is under warranty. First, the end user has to pay
the airfare, travel labor, and travel costs to get the problem
diagnosed. Once diagnosed, the part is ordered on a stock order,
which can take four weeks or 15-20 percent of the construction
season in Alaska. To speed the process the end user often elects
to pay for expedited freight. Once the part arrives, the end
user will again have to pay the costs to have the mechanic come
back out and fix the piece of equipment. He estimated that on a
$4,000-$5,000 warranty work order, the manufacturer may only
cover $500.
Product updates are similarly problematic. The costs can easily
be $3,000-$4,000 on a repair that only takes two hours, which is
what the manufacturer will cover plus maybe $450 in travel
costs. The balance is put on the vendor or the end user.
MR. GERONDALE said the only opposition to SB 56 that he has
heard comes from the manufacturers. They argue that the
additional cost will increase the price of equipment, but the
reality is that the end user already assumes the burden of the
additional costs. SB 56 puts some of the burden back on the
manufacturer that built a piece of equipment that needs to be
repaired.
Responding to the concern expressed that manufacturers may stop
doing business in Alaska, he pointed out that boat and ATV
manufacturers did not pull out after the ATV lemon law was
enacted in 2009.
3:22:13 PM
SENATOR GARDNER asked where product updates are covered in the
bill.
MR. GERONDALE deferred the question to Steve Seward.
3:22:44 PM
At ease
3:22:48 PM
CHAIR COSTELLO reconvened the meeting.
3:23:10 PM
STEVE SEWARD, Attorney for Construction Machinery Industrial,
LLC, Seattle, Washington, directed attention to page 8, line 12.
It is part of the definition of required services.
3:23:52 PM
JIM HALLORAN, Caterpillar Inc., Peoria, Illinois, said he wanted
to make three points. First, N.C. Machinery and Caterpillar have
had an agreement in place since 1926 and there has not been an
issue. Second, because Caterpillar's agreements are global, he
disputes the statement that Alaska is unique. Third, he
maintained that Caterpillar's contracts are working and have
allowed the company to service its Alaska customers for over 90
years.
SENATOR STEVENS asked how much of the burden would go back on
the manufacturers if the bill were to pass.
MR. HALLORAN explained that Caterpillar pays for parts. They do
not pay for time and travel, but they will discount the price of
the machine to cover things like that. The dealer appreciates
that unique twist because they can use the money as they see fit
if warranty service isn't required. For example, it could be
used to provide an incentive for the customer to purchase the
machine.
3:27:01 PM
NICK YAKSICH, Senior Vice President, Association of Equipment
Manufacturers (AEM), stated that AEM represents over 950
companies that manufacture off-road highway equipment. He made
four points and reinforced Mr. Halloran's comments. First, they
work with and support the dealer and manufacturer as a
partnership to ensure customer satisfaction. Second, he has yet
to hear any specific problems that have arisen with dealers in
Alaska. In any event, they would prefer to work directly with
the dealer to resolve an issue. Third, this bill infringes on
the private contractual relationship between the manufacturer
and the dealer. Fourth, they would prefer to work directly with
the dealer and outside the legislative process to find a
solution to ultimately serve the customer.
3:28:43 PM
CHAIR COSTELLO held SB 56 in committee with public testimony
open.
3:29:20 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:29 p.m.